GOING STRONG AT 70 1/2: DELAY REQUIRED MINIMUM DISTRIBUTIONS?

If your company has discovered the advantages associated with hiring older workers - like know-how, experience, work ethic, etc. - you may be interested in the conclusion articulated by the IRS in its spring 2012 issue of Retirement News for Employers.

This IRS publication addressed the required minimum distribution (RMD) question when a new hire who is 70 1/2 or older rolls over a distribution from a prior employer's retirement plan to a new employer's plan. As a general rule, RMDs must begin when a person reaches age 70 1/2.

However, an employer's plan may permit the delay of required minimum distributions until the employee retires. The IRS has stated that when a new hire must begin to receive RMDs from amounts rolled over into the new employer's plan depends on the terms of the new employer's plan.

If the terms of the plan allow employees over 70 1/2 to delay required minimum distributions until they no longer work for the company, the plan is not required to make RMDs to the newly hired employee until that time - unless the new employee owns 5 percent or more of the company. If the terms of the plan call for RMDs to be paid to employees over 70 1/2, even if they continue working for the company, the plan must make these distributions to the new employee, too.

If the employee is a 5 percent or greater owner of the business, the plan must make required minimum distributions even while the new employee continues to work for the company.

Read the IRS analysis.

 
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